ALBANY – The breathtaking incompetence with which Gov. Paterson has handled the Charles O’Byrne tax scandal has shocked many of the governor’s aides, as well as his Democratic allies – and raised fears in the Legislature that Paterson isn’t up to the far more difficult tasks ahead.

That’s especially true because O’Byrne, the accidental governor’s “non-filer syndrome”-suffering, $178,500-a-year chief of staff who failed to pay taxes for five years running, is supposed to be Paterson’s lead negotiator for the upcoming legislative sessions – one just three weeks away – at which the governor will ask lawmakers to cut an unprecedented $13 billion from state spending.

O’Byrne’s title of “Secretary” is a 19th -century term that suggests a mere note-taker but actually describes an all-powerful aide.

“The secretary is effectively the governor’s alter ego,” said Meyer “Sandy” Frucher, once a close adviser to Govs. Mario Cuomo and Hugh Carey.

“Any governor must be dependent on his secretary not just for management of the government but also for implementing the administration’s policies,” added Frucher, the former head of the Philadelphia Stock Exchange and a vice chairman at the Nasdaq.

Put another way, the secretary is the governor’s top gatekeeper, key liaison to business and labor, and chief negotiator.

It’s the secretary who receives the most confidential communications meant for the governor – a key favor requested here, a corporate need there, a union strike in the works, a looming possible terrorist attack.

The secretary gives orders that heads of state agencies must follow, be it the State Police, the Division of Military and Naval Affairs or the state health commissioner.

And because Paterson is legally blind, the secretary is also the eyes of the governor when it comes to reviewing the key documents and memoranda which relate to the day-to-day operations of government.

Lastly, O’Byrne, an ex-priest with a strong empathetic streak, and Paterson, who was raised a Catholic, are described as unusually close friends.

But now that O’Byrne is viewed as damaged goods by the leaders of the Legislature – and they’ve made that view clear in private during the past few days – they’re certain to stiffen their resistance to Paterson’s stated determination to right-size state spending and avoid increases to the state’s already crippling income- and business-tax burden.

“Can you imagine O’Byrne trying to argue with a straight face [in negotiations with legislative leaders] that taxes in New York are too high, when he didn’t pay his for five years?” asked a senior Assembly Democrat.

O’Byrne’s credibility has been badly impaired by his public misrepresentations of the amount of back taxes he owes – about 50 percent higher than initially claimed – and his statement last week that he had already made full restitution, when he hadn’t.

And O’Byrne’s now-indelible association with an alleged “non-filing syndrome” has made him enough of a laughingstock that the state Capitol was rife with jokes yesterday – such as, “If the budget is delayed, we claim ‘late-budget syndrome.’ ”

Fears about Paterson’s ability to personally handle the state’s budget crisis have focused on his flip-flops, misstatements and, possibly, outright lies about when and what he knew about O’Byrne’s tax evasion, and what, if anything, he did about it.

At the heart of the fear is the growing view – which first emerged in the newly inaugurated Paterson’s revelations of sexual philandering and related questionable use of his campaign funds in March – that his first instinct is to lie about a problem and his second is to fudge.

Insiders at the Capitol are still catching their breaths over the painful and embarrassing “full disclosure” press conference directed by Paterson on Wednesday to answer questions about O’Byrne’s taxes.

“It was a classic study in how not to handle a crisis, making it worse while trying to make it better, and God only knows how he’ll handle another crisis in the future,” said a senior Democrat in the Legislature.